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One reason servicers haven't more wholeheartedly adopted bolder tactics is lingering concern over getting sued by investors who are ultimately entitled to the loan payments through mortgage-related securities. Servicers are contractually bound to act in the interest of investors overall, but they might still not rewrite loans, even when that creates the most value in the aggregate, since modifications can impact certain investors more than others  and it only takes one to sue. That's why on Feb. 4. the House Financial Services committee met to talk about making a law to shield servicers from such lawsuits. The law, first proposed by real estate and law professors at Columbia University, would create a so-called legal safe harbor, and ostensibly kick up modification efforts. The professors believe this to be the case because they've observed that firms that directly own mortgages are more successful at modifying them than are the companies servicing them for others. (Read the proposal from America's realtors on how to revive the housing market.)

But even such a law combined with financial incentives for modification won't guarantee that servicers will do what it takes to avoid foreclosure in the long run. Over the past few months, as loan defaults have continued to rise, the Maryland Office of Financial Regulation has noticed an increase in servicers crafting modifications with lower monthly payments. That's a good sign  unless, perhaps, those lower payments come with a balloon payment further down the road, as White has often noticed in the loans he's studied.

Nationally, the idea is similar  pushing back principal payments, not forgiving them entirely, is the solution trumpeted by the FDIC. That seems fairer: telling people that they can get a break now, but will eventually have to pay may alleviate qualms about handing out free rides. Or it may just be dooming us to have this conversation all over again. Unfortunately, without good data on what has worked so far, it's remarkably difficult to determine what to do going forward. Of course, ignoring the issue hasn't worked too well either.